BLBG:Pound Reaches 15-Month High Against the Euro; Gilts Decline on U.S. Jobs
The pound reached the highest in 15 months against the euro, heading for a fifth weekly gain, after a European Central Bank Governing Council member said Germany is the biggest obstacle to increasing the region’s bailout fund.
Gilts fell as stocks rose before a report economists forecast will show hiring in the U.S. accelerated last month. Payrolls climbed by 155,000 workers after rising 120,000 the previous month, according to the median forecast of 84 economists surveyed by Bloomberg News. Data this week showed overseas investors boosted their U.K. government bond holdings by the most in three years in November.
“The pound is underpinned by demand for sterling assets while the euro region is still a trouble spot,” said Geoffrey Yu, a currency strategist at UBS AG in London. “The benefit of the pound is that the U.K. is not in the euro zone.”
The pound climbed to 82.39 pence per euro, the strongest since Sept. 10, 2010, before trading little changed at 82.56 pence as of 10:51 a.m. London time. Sterling was also little changed at $1.5490 and 119.48 yen. The currency gained 0.9 percent against the euro from last week.
Ten-year gilt (GUKG10) yields rose three basis points, or 0.03 percentage point, to 2.08 percent. The 3.75 percent bond due September 2021 fell 0.27, or 2.7 pounds per 1,000-pound face amount, to 114.545. Two-year note yields also climbed three basis points, to 0.44 percent. They fell to a record low 0.271 percent on Dec. 30.
Euro Obstacles
Sterling has risen 3 percent against a basket of nine developed-market peers in the past six months, making it the third-best performer after the Japanese yen and the U.S. dollar, according to Bloomberg Correlation-Weighted Indexes.
ECB Governing Council member Klaas Knot said Germany should support raising the European emergency fund to help end the region’s debt crisis.
“The most important obstacle lies in Germany, not in the Netherlands,” Knot said in an interview on Dutch public television last night. “I think that more money is needed and we will use the time to convince our German colleagues.”
U.K. government bonds fell alongside U.S. Treasuries and German securities ahead of the U.S. jobs data that will be published at 8:30 a.m. in Washington. A report yesterday from ADP Employer Services showed companies added 325,000 workers in December, more than the 178,000 increase forecast by economists in a Bloomberg survey, and the most since the series began in 2001.
“We expect a worldwide slump to be avoided in 2012,” Bill O’Neill, chief investment officer for Europe, Middle East and Africa at Merrill Lynch International in London, wrote in an e- mailed research note. Government bonds at current yield levels “only offer value in a double-dip environment,” he said.
Gilts Underperform Bunds
Gilts underperformed their German counterparts today, the benchmark for euro-area debt markets, as concern that banks are not adequately capitalized and a decline in consumer confidence capped German bond yields.
The yield spread (.GBGER10) between 10-year gilts and German bunds widened to 20 basis points, the most on a closing basis since Nov. 22. That’s up from 19 basis points yesterday and 15 basis points at the end of last week.
An index of executive and consumer sentiment (EUESEMU) in the 17- nation euro area fell to 93.3 in December from a revised 93.8 in the previous month, the European Commission in Brussels said today. That’s in line with the median of 19 economists’ estimates in a Bloomberg survey. The unemployment rate held at 10.3 percent in November, a separate report showed.
UniCredit SpA tumbled 8.2 percent after announcing a rights offer at a 43 discount two days ago. Deutsche Bank AG shares fell 1.5 percent today.
“Gilt yields are more sensitive to positive U.S. economic data and sentiment whereas for bunds there is more difficulty shrugging off the difficult start for bank stocks early in 2012,” said Sam Hill, a fixed-income strategist at RBC Capital Markets in London.
To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net;
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
